Question

How Bad Performance Management Killed Microsoft’s Edge

By DARCY JACOBSEN

What went wrong? Microsoft has been crippled by a management system known as “stack ranking.” Like the hated bell curve of your high school memory, this program forced each business area to rank a certain percentage of employees as top, good, average, or poor performers. That means that even if your department was full of stars, a certain quota would be getting bad reviews—no matter how hard they worked. Pretty demoralizing.

Here is a quote from the preview of the article that’s now available online:

“Every current and former Microsoft employee I interviewed—every one—cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees,” Eichenwald writes. “If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, 2 people were going to get a great review, 7 were going to get mediocre reviews, and 1 was going to get a terrible review,” says a former software developer. “It leads to employees focusing on competing with each other rather than competing with other companies.”

This sort of cannibalistic performance management practice—with its rigid, stratified winner’s circle—completely disengaged many workers at the company, and led to a culture that did not encourage cooperation or teamwork. Innovation and excellence fell victim to the need to compete with co-workers for not only recognition but survival. Said one former employee: “It was always much less about how I could become a better engineer and much more about my need to improve my visibility among other managers.”

Microsoft, once the uncontested king of the tech industry, has faltered while companies like Facebook, Apple and Google have excelled. Where Microsoft had a head start on technologies like smart phones, social networking and e-reader tablets, in every case the company’s culture, which penalized risk-taking, caused them to fail.

Good talent management is not divisive; it is inclusive. It takes into account the viewpoints of peers; it doesn’t pit you against peers. It is flexible and immediate and responsive to the needs of management and the needs of workers. It works in tandem with the culture you want to encourage; it does not set up a new, toxic culture. The surest way to kill your company is to ignore these principles.

Read the case and answer the following questions. All questions carry equal marks.

Q1. Identify the performance measurement approach adopted in the Microsoft company and analyze its negative impact on employee morale, creativity and work-outcomes.

Q2. Identify and explain the key stages of performance management cycle in which Microsoft company made errors in designing an effective performance management system. Give examples.

Q3. In your opinion, is the performance management system at Microsoft ethical? Can it create legal issues for the company?

Q4. Plan and propose a new performance management system for Microsoft company capable of motivating the employees, taking into consideration all the stages of PMS development.

How Bad Performance Management Killed Microsoft’s Edge

By DARCY JACOBSEN

What went wrong? Microsoft has been crippled by a management system known as “stack ranking.” Like the hated bell curve of your high school memory, this program forced each business area to rank a certain percentage of employees as top, good, average, or poor performers. That means that even if your department was full of stars, a certain quota would be getting bad reviews—no matter how hard they worked. Pretty demoralizing.

Here is a quote from the preview of the article that’s now available online:

“Every current and former Microsoft employee I interviewed—every one—cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees,” Eichenwald writes. “If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, 2 people were going to get a great review, 7 were going to get mediocre reviews, and 1 was going to get a terrible review,” says a former software developer. “It leads to employees focusing on competing with each other rather than competing with other companies.”

This sort of cannibalistic performance management practice—with its rigid, stratified winner’s circle—completely disengaged many workers at the company, and led to a culture that did not encourage cooperation or teamwork. Innovation and excellence fell victim to the need to compete with co-workers for not only recognition but survival. Said one former employee: “It was always much less about how I could become a better engineer and much more about my need to improve my visibility among other managers.”

Microsoft, once the uncontested king of the tech industry, has faltered while companies like Facebook, Apple and Google have excelled. Where Microsoft had a head start on technologies like smart phones, social networking and e-reader tablets, in every case the company’s culture, which penalized risk-taking, caused them to fail.

Good talent management is not divisive; it is inclusive. It takes into account the viewpoints of peers; it doesn’t pit you against peers. It is flexible and immediate and responsive to the needs of management and the needs of workers. It works in tandem with the culture you want to encourage; it does not set up a new, toxic culture. The surest way to kill your company is to ignore these principles.

Read the case and answer the following questions. All questions carry equal marks.

Q1. Identify the performance measurement approach adopted in the Microsoft company and analyze its negative impact on employee morale, creativity and work-outcomes.

Q2. Identify and explain the key stages of performance management cycle in which Microsoft company made errors in designing an effective performance management system. Give examples.

Q3. In your opinion, is the performance management system at Microsoft ethical? Can it create legal issues for the company?

Q4. Plan and propose a new performance management system for Microsoft company capable of motivating the employees, taking into consideration all the stages of PMS development.

Answer 1

Performance management approach and its negative impact on employees

Approach- stack ranking, in this, each business area ranked a certain percentage of employees as a top, good, average or poor performer.

Negative impact on employees

• Morale- is down, as if employees are performing well then it is a possibility that he/she is in that percentage area of employee those are ranked poor.
• Creativity- creativity is not shown on performance as ranking is not based on performance. the ranking is random.
• Work outcome- no unity in a group as employees are jealous of each other ranking. employee start competing with each other instead of with other companies. It directly affects performance and leads to low work outcomes.

Key stages of the performance management cycle in which Microsoft company made errors in designing an effective performance management system-

• Employee focus- employees focus shift from performing to competing with employees within the organization.
• Innovation and excellence- fell as employees fight for survival rather than for innovation.

No performance management cycle is not ethical with reference to employees as employees are not judged by performance or talent but they are treated with a stratified rigid winner's cycle. a consistent system of ranking followed in organizations and employees become a victim of this cycle.

New performance management system-

• Performance evolution- weekly or monthly evolution of employee's performance.
• Performance review- reviewing the performance by doing 360-degree evolution ( i.e on every aspect)
• Feedback- whether performance is good or bad feedback must include, as employees know where he stands. by these employees become more productive.
• Learning and Development- there should be some learning activities that also enhance the overall development of employees.
• Good performance recognization- recognizati0n itself motivate the employee. so recognization is a good tool in performance management.
• Communication and Collaboration- proper communication of employees between upper staff as well as with junior staff so that no blockage develop between employees.

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